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But there are ways in which, financially speaking, we can be our own worst enemies.
Perhaps you pass by a store window and see a gorgeous and pricey jacket displayed on a store mannequin.
You put all your diligent financial planning and budgeting on the back burner.
The jacket is, in this fragile moment, more important.
This is called present bias.
Instant gratification wins, much to your future detriment.
But you’re able to cope with present bias to make it make better decisions.
Overconfidence Bias
Samuelsson pointed out that many people overestimate their abilities, knowledge and chances of success.
Such overconfidence can wreak havoc on your finances.
For example, lets say you see an ad for a credit card that highlightsimpressive cashback rewards.
This is called anchoring bias.
To overcome anchoring bias, diligently examine all pieces of information relevant to thepurchase or investmentyou feel strongly about.
Be interrogative and set objective criteria for making decisions.
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